China Sees New Surge In Daily COVID Cases

The Zero COVID "Reopening" Will Be Delayed--Again

The failure of China’s Zero COVID policy continues to be writ large in the Chinese economy. As cases surge in the Middle Kingdom, so too are lockdowns.

The resurgence of COVID cases in China, with 32,695 new local infections recorded for Thursday as numerous cities report outbreaks, has prompted widespread lockdowns and other curbs on movement and business, as well as pushback.

China’s proposed “modifications” to the Zero COVID policy were supposed to make the policy less onerous for foreign businesses, and help keep the Chinese economy functioning. However, those modifications appear to have been the first casualty of this latest wave of infections.

The French Chamber of Commerce in China called for authorities to properly implement COVID "optimisation" measures it announced two weeks ago, in a statement widely shared on social media after the French embassy posted it on its Twitter-like Weibo account on Thursday.

The 20 measures, which include shortened quarantines and other more targeted steps, had "given hope" to French companies for more bilateral trade and economic exchanges, but "good policies also need to be implemented in a uniform manner and without adding layers of other contradicting policies", the chamber's statement said.

The announcement of the 20 measures, just as rising cases prompted an increasingly heavy response under China's strict zero-COVID approach, has caused widespread confusion and uncertainty in big cities, including Beijing, where many residents are locked down at home.

The lockdowns have also given rise to an heretofore unheard-of level of worker discontent and protest, most notably in China’s largest iPhone manufacturing facility in Zhengzhou, with some 20,000 new hires opting to simply leave the plant.

The departures from the world's largest iPhone factory deal a fresh blow to the Taiwanese company that has been grappling with strict COVID-19 restrictions that have fuelled discontent among workers and disrupted production ahead of Christmas and January's Lunar New Year holiday.

As a result of the disruptions, Foxconn, owner of the facility, is looking at a 30% reduction in iPhone output.

The estimate was an upward revision of an October internal forecast for production impact of up to 30% at the world's largest iPhone factory, said the source, who sought anonymity as the information was private.

The protests themselves were only partially over the outbreak of COVID cases at the Zhengzhou facility, as there have been reports of overdue pay, postponed payments of bonuses, in addition to workers being forced to share dormitory space with workers who test positive for COVID.

Men smashed surveillance cameras and clashed with police as hundreds of workers protested at the world's biggest iPhone plant in Zhengzhou city on Wednesday, in rare scenes of open dissent in China sparked by claims of overdue pay and frustration over severe COVID-19 restrictions.

The situation at the plant is bad enough that Apple is putting staff onsite, presumably to make sure that Foxconn is responding to worker concerns.

Meanwhile, China’s National Health Commission is reminding one and all that Zero COVID remains very much the official policy, and that everyone must be committed to enforcing the policy.

The National Health Commission (NHC) convened a meeting on Wednesday hosted by its head, Dr Ma Xiaowei, to study the messages delivered during the Communist Party congress held in October.

Dr Ma said officials must be committed to zero-Covid-19 and the work of controlling the coronavirus, according to a statement from the commission.

“We must resolutely maintain the general approach of ‘preventing imported cases and domestic resurgence’ and the overall strategy of ‘dynamic Covid-zero’,” he said in the meeting.

However, the persistence of the Zero COVID policies is continuing to shave percentage points off China’s GDP growth. Just a delay of a single year, until 2024, for China’s Zero COVID “reopening” is forecast to shrink GDP growth by a full percentage point at least.

The likely delayed Covid-19-zero reopening may shave almost 1 percentage point off China’s gross domestic product growth (GDP) in 2023, according to Oxford Economics.

If China pushes back its economic reopening to the first half of 2024, an anticipated recovery in private consumption will be delayed, wrote Oxford Economics senior economist Louise Loo in a Friday report. This may knock almost a full percentage point off the firm’s projected growth forecast of 4.2 per cent for 2023.

Already, the warning signs of economic contraction are accumulating, with China’s Manufacturing PMI lingering in contraction territory for the past three months.

At the same time, China’s electricity production has dropped significantly in recent months, indicating more businesses are shutting their doors due to Zero COVID, eliminating swaths of energy demand across the country.

Zero COVID remains the equivalent of a mass shutdown of the Chinese economy, particularly as lockdown measures become widespread. China can have its draconian Zero COVID lockdowns, or it can have economic activity and (hopefully) some economic growth. It cannot have both.

Even in a top-down centralized and planned economy such as what China has been moving towards in recent years, economic activity requires that people be able to move about and interact with each other more or less freely.

Where people are locked down, where movements are restricted because of fears over a virus, there can be no economic activity, and no economic growth.

The longer Zero COVID endures, the greater China’s economic collapse will be. The longer Zero COVID endures, the greater Chinese unemployment and the greater the reduction in personal income among Chinese workers.

Small wonder workers in Zhengzhou are pushing back against the policies. Like workers everywhere, they want to get paid. Zero COVID stands in the way of that.